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Albany Molecular Research Inc. Message Board

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  • NVR2LATE4 NVR2LATE4 Aug 9, 2000 11:35 AM Flag

    re: "stock split"

    Sorry, you were wrong when you say a split means
    nothing.... You obviously are interpreting the commentts in
    an absolute value sense rather than an inherent
    value. In that aspect I would agree, the 'free' comment
    was simple....I do question YOUR 'amatuer' status
    when you do not address 'cost of odd lots',
    'liquidity', and 'shorting/liquidity issues'.... Rather than
    retype what I have said before about the
    'benefits'..here is an excerpt..(find it at any finacial info
    website)

    Companies split their stock to make the price more
    affordable to more investors. At a lower price, investors
    can buy even lots of the stock and avoid the high
    commissions attached to odd lot purchases. As a larger number
    of investors buy the stock, demand increases and
    thus a run-up in the stock price usually occurs. Also,
    stock splits create liquidity as existing shareholders
    find it easier to sell the stock when the price is
    affordable to others.
    The psychological effect the word
    "split" has on investors is rather strong. Some investors
    may automatically associate the word "split" with a
    lower price and a "good buying opportunity." There does
    seem to be a marketing hype to funds announcing a
    split. It�s possible that fund companies are trying to
    capitalize on investors� preconditioned favorable reaction
    to stock splits.

    Company Benefits: a company
    will split its stock in order to make the price of
    their stock more attractive (affordable) to investors
    by, in effect, dropping the price of the stock. A
    prospective purchaser of XYZ Company can now pick up a share
    of stock for $50.00 post-split. The potential is for
    more investors to begin buying the cheaper stock,
    creating activity and momentum for the company. There is a
    psychological aspect to lowering the price of a share in a
    company through a split, especially one that is popular
    or in a popular industry. Even though the actual
    value of a share is halved through a split, the
    impression to buyers is that they can now get a share of XYZ
    for half the price. Depending on the company and its
    industry, a share�s price can begin to rise right after a
    split, and in many cases can, over time, go back to
    where it was pre-split.
    Investor Benefits:
    shareholders of XYZ Company now have twice the shares they did
    before. Assuming the cheaper price entices new investors
    to buy, the activity in the stock will naturally
    cause the price to begin to rise. In the long run, as
    XYZ Company does well and the value of XYZ stock
    increases, then having more post split shares in your
    portfolio will have a compounding effect on your entire
    position in XYZ Company.


    If you want to banter
    about this, rather than fill up the AMRI baord..... My
    email is NVR2LATE4@yahoo.com

    Bully

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